Ceglia v. Zuckerberg, 2012 WL 503810 (W.D.N.Y. Feb. 14, 2012) is a federal opinion from outside California that caught our eye for its departure from the so-called “forum rule”--reasonable attorney’s fees in the fee-shifting area are usually based on the work for comparable attorneys in the venue of the particular case. The departure was inspired by the differences between true fee-shifting statutes versus sanctions.

The dispute in this case was between plaintiff and Mr. Zuckerberg on the authenticity of a contract for development and commercialization of two separate Internet business ventures and the social-networking website created and maintained by defendant Zuckerberg now known as Facebook. So, the odds were high, with Mr. Zuckerberg maintaining that the contract was a forgery. Plaintiff, during the course of the dispute, got hit with e-discovery sanctions for failing to comply with prior discovery orders.

Plaintiff’s main opposition centered on the defense use of attorneys from the New York City metropolitan area rather than less expensive attorneys venued where the case was, namely, Buffalo, N.Y. Although the “forum rule” usually governs fee-shifting contractual/statutory disputes, attorney’s fees awarded as sanctions for discovery abuses under FRCP 37 serve a deterrence rather than fee-shifting compensatory purpose such that a district court has discretion to use out-of-district hourly rates to calculate fee sanctions awards. (Cf. On Time Aviation, Inc. v. Bombardier Capital, Inc., 354 Fed.Appx. 48, 452 (2d Cir. 2009) [same result under FRCP 11].) However, even if the punitive nature of Rule 37 awards did not apply, the circumstances were exceptional so as to justify a deviation from the normal rule given the nature of the claim and need to have specialized counsel to address e-discovery/forgery issues.

Also, fee claimant attorneys did a good job in substantiating their hourly rates and delegating lower level work to “cheaper” attorneys.

However, as we have cautioned before, “block billing” can get you into trouble as far as fee submissions are concerned. Although apparently not prohibited in the Second Circuit, it does raise enough concerns because of making evaluation difficult, if not impossible, such that the court is permitted to make a simple reduction in the number of hours to “trim the fat.” Here, that butchering factor led to an across-the-board 10% reduction.

Lower Court Needed to Enter Final Judgment Under CCP § 708.470, But Appellate Court Preserved Priority Status Quo While This Was Being Accomplished.

Well-known Orange County law firm in Grabowski v. Rutan & Tucker, Case No. G044438 (4th Dist., Div. 3 Feb. 24, 2012) (unpublished) obtained a judgment against client for legal fees. Five years later, law firm learned that client would get a large settlement from resolution of a family dispute. Law firm files a notice of judgment lien in the family dispute action to claim its stake to the settlement proceeds. After the lower court ordered the parties to prepare a final judgment in the case (which apparently was never accomplished), the law firm filed a motion for order for satisfaction of judgment lien under CCP § 708.40. The trial court granted the motion, but the appellate court reversed with caveats.

Presiding Justice O’Leary (she was confirmed as P.J. on February 10, 2012--the first female P.J. of the 4/3 court), in a 3-0 opinion, did a nice job of explaining the notice of lien judgment creditor scheme, which indeed is creditor friendly but with due process protections for debtor and other competing creditors. However, you gotta have a final judgment in the pending action before the lien can be satisfied. Get a final judgment, the appellate court said, and everything will be okay for lien satisfaction. In the interim, the appellate court reiterated that law firm’s lien retained its priority as of the date of its initial filing in the family dispute action.

Fee Substantiation Was Adequate, Where Detail Told the Appellate Court All You Needed to Know.

For all of you Spam lovers (bad pun, because this is really, an Internet Anti-Spam case), this next case will be of interest. Not to mention the derivation of the term “spam” in the email context--we will leave it to you to do that research yourself by going to Hypertouch Inc. v. ValueClick, Inc., 192 Cal.App.4th 805, 818 n. 4 (2011).

California does have a fee-shifting statute in favor of the prevailing plaintiff under the Anti-Spam Law. (Bus. & Prof. Code, § 17529.5(b).) So, even though the winner gets small actual damages or only liquidated damages of $1,000 for each unsolicited commercial e-mail violation the Anti-Spam Law, the attorney’s fees recoverable may well be the “end game.” That was the case in the opinion we now review.

Daniel (“Dan Hates Spam”) L. Balsam, a well known California attorney with experience in the spamming area, did win $7,000 in liquidated damages under the anti-Spam Law in the published opinion of Balsam v. Trancos, Inc.,Case Nos. A128485/A129458 (1st Dist., Div. 1 Feb. 24, 2012) (certified for publication), where the appellate court determined that untraceable domain name emails could under the right circumstances give rise to liability.

However, Mr. Balsam also won $81,900 in attorney’s fees as the prevailing party (out of a requested $133,830).

Defense challenges to the merits and fees orders did not succeed.

Even though the case could have been brought as a small claims or limited case (even though it clearly exceeded small claims jurisdiction based on the number of emails involved at the start and Mr. Balsam sought permanent injunctive relief outside of the ambit of a limited civil case), the trial court still has discretion to still award fees. (Code Civ. Proc., § 1033(a).) The billings submitted by Mr. Balsam’s counsel, although not up to “big firm” billing practices, did indeed break down hours, hourly rate, and nature of the tasks performed--good enough to allow for intelligent review sustaining the amount of the fee award.

February 24, 2012

Second District Panel Reverses Lower Court’s Denial of Costs to Winning Defendant.

Defendant won a bench trial in New Life Agency, Inc. v. Beitler Services, Inc., Case No. B224724 (2d Dist., Div. 1 Feb. 23, 2012) (unpublished), but denied costs to defendant based on the perception that “both sides have dirty hands.” The appellate panel reversed the costs denial, because Code of Civil Procedure sections 1032(a)(4) & (b) had no equitable exceptions, such that defendant was entitled to costs as a matter of right.

Special Mobilehome Residency Law Fee-Shifting Provision Entitled Plaintiffs to Fee/Costs as Prevailing Parties.

Civil Code section 798.85 is a special fee-shifting statute in the Mobilehome Residency Law statutory scheme, mandating an award of reasonable attorney’s fees and costs to the prevailing party under the scheme.

Interestingly enough, the referee later vacated the restitutionary award, but the appellate court ordered it reinstated. That meant plaintiffs were still the prevailing parties, justifying the substantial fees/cost awards made below. The appellate court also observed plaintiffs could file another fee/costs award for successful appellate work.

Second District Panel Disagrees With Contrary Holding in Finney; Approximation of Hours Under Penalty of Perjury Can Be Adequate Fee Substantiation.

The Second District, Division 4 in Lin & Lin v. Jeng, Case No. B232899 (2d Dist., Div. 4 Feb. 23, 2012) (certified for publication) considered the extent of trial court discretion to apportion attorney’s fees under Code of Civil Procedure 874.040, a fee-shifting provision applicable to partition actions. In this case, the appellate panel disagreed with the prior holding of Finney v. Gomez, 111 Cal.App.4th 527, 545-546 (2003) that equitable apportionments can only be made under two circumstances--where litigation arises among only some of the parties, or where the interest of the parties in all items, lots, or parcels of property is not identical. The Lin & Lin panel found Finney was inconsistent with the broad statutory language of section 874.040 and erred in limiting equitable discretion by using Law Revision Commission comments to “trump” the statutory provision itself. Rather, the statute’s broad language did not limit the trial court’s equitable discretion as Finney earlier held.

With respect to fee substantiation, counsel’s declaration with an approximation of hours, made under penalty of perjury, sufficed, especially given that no specific amount was challenged as being unreasonable by the contesting parties on appeal.

Brett Emison, in a February 20, 2012 post at injuryboard.com, is steaming mad about a Missouri bill pending to change “American rule” fee-shifting in personal injury cases for purposes of discouraging frivolous suits. Even though Mo. Rev. Stat. § 514.205 seems to already have frivolous lawsuit sanctions, the proposed legislation (HB 1342) appears to permit a winning defendant to invoke the “British rule” but prevents winning plaintiffs from doing so. He also describes some disparities in the proposed legislation in which winning parties may have to pay opponent fees in certain circumstances. Interestingly enough, Mr. Emison cites to research by law professor John Vargo suggesting that the British rule (winner gets fees and costs no matter what) escalates legal expenses and upends settlements. He also indicates that the Florida Medical Association, while initially lobbying for imposition of the British rule, later recanted and wanted a repeal because the rule caused expensive losses for doctors and hospitals.

In a shareholder class action arising from Exxon Mobil’s acquisition of XTO Energy in 2010, a Texas state appeals court earlier this month more than doubled the fee originally awarded by a trial court to plaintiffs’ lawyers for a settlement in which nothing went to shareholders. The final award: about $8.6 million. The Texas appellate court found exceptional results based on what defendants did agree to correct in a settlement, such that it found a 1 multiplier-enhanced lodestar to be an abuse of discretion. Rather, it agreed with plaintiffs’ attorneys that a 2.17 multiplier was correct, which coincided within about $500 of the maximum amount that Exxon agreed to pay anyway under the settlement agreement.

In In re Delta/AirTran Baggage Fee Antitrust Litig., 2012 U.S. Dist. LEXIS 13462 (N.D.Ga. Feb. 3, 2012) [Doc. No. 263 on the case docket], U.S. District Judge Timothy C. Batten, Sr. decided that Delta needs to pay attorney’s fees and costs for e-discovery issues in consolidated antitrust cases claiming Delta and AirTran Holdings, Inc. conspired to charge customers $15 to check their first bag. The district judge reopened discovery against defendants based on untimely production of records and proof suggesting that there was overwriting of backup tapes, inconsistencies in deposition testimony and documents on what happened, and neglect in searching and producing documents from hard drives. District Judge Batten determined Delta had violated F.R.Civ.P. 26(g) early disclosure requirements and failed to supplement discovery so as to justify sanctions under F.R.Civ.P. 37(c)(1). Although not precluding introduction of documents as sanctions, Judge Batten did decides that Delta needed to pay plaintiffs’ fees and costs in bringing the discovery motions and for extended discovery activities. He strongly suggested that both sides meet and confer to see if these fees and costs could be agreed to. Ouch!

In re Marriage of Falcone & Fyke, Case Nos. H034104 et al. (Feb. 23, 2012) (certified for publication) involved five in pro per appeals by wife challenging various family law rulings, including denial of her oral fee request, a $833,025 sanctions fee award in favor of her husband at the trial level, $20,000 for appellate work to husband’s attorney from wife’s prior unsuccessful appeal of a sanctions order, and another $16,275 sanctions fee order after remand of a prior order reversed in yet another appellate proceeding.

All of her appeals were rejected. With respect to her 11th hour oral needs-based fee request, the appellate court did indicate a preference for written motions because they truly do specify the grounds for such an award under Family Code section 2030/2032. Beyond that, family law courts are empowered to hear motions based upon declarations, and are not required to allow oral testimony in support of fee motions. No statement of decisions are required on fee motions, but wife waived any error by failing to herself provide a proposed statement for court consideration. Finally, wife was deemed a vexatious litigant for misusing the courts of California--which likely means we will not see these litigants again in this particularly prolonged family law donnybrook.

February 23, 2012

Public Entity Does Not Have to Provide Cost Estimate Under Public Resources Code Section 21167.6.

Ya know, unpublished decisions sometimes have gems in them. The next one is no departure, potentially indicating a departure with a prior appellate decision on a cost issue under Public Resources Code section 21167.6.

In Landwatch San Luis Obispo Co. v. Cambria Community Services Dist., Case No. B229545 (2d Dist., Div. 6 Feb. 22, 2012) (unpublished), a nonprofit corporation lost a CEQA challenge, inspiring the lower court to award the prevailing public entity with costs for preparing the administrative record. The nonprofit challenged the costs award, but was rebuffed on appeal. (The final cost award was $14,615.41, which we could say “c’mon” to, but everyone is entitled to do what they do--nonprofits, governmental entities, and private concerns.)

After determining that the appeal was jurisdictionally proper, Presiding Justice Gilbert on behalf of a 3-0 panel rejected nonprofit’s argument that the lower court had to consider its request for a cost estimate in awarding costs. Public Resources Code section 21167.6(b)(1) was the governing statute, but nothing in it requires the public agency to provide a cost estimate for preparing the record as a condition of receiving a prevailing costs award.

However, nonprofit did rely on some reasoning to the contrary in Hayward Area Planning Ass’n v. City of Hayward, 128 Cal.App.4th 176 (2005). The Second District, Division 6 panel was not impressed. Here is what the justices said in their opinion: “To the extent Hayward may be read as standing for the proposition that a public agency is required to provide a cost estimate on request, it cites no authority. [Citations omitted.] Nor does [appellant] cite any stautory authority for such a proposition .... We decline to follow Hayward in adding to section 21167.6 what the Legislature did not.” (Slip Opn., p. 5.)

Failure to Specify Statutory Basis For Fee Award Was Not Reversible Error.

Husband in Marriage of Fong, Case No. B233513 (2d Dist., Div. 3) (unpublished) got hit with a $180,000 adverse award of attorney’s fees in favor of wife under various Family Code sections based on need or sanctioning authority--areas we have discussed a lot in the past under our Home Page category “Family Law” or “Family Law Awards.” So, what did he do? You got it--appealed, but with no luck.

His principal argument was the failure to specify a statutory section for the fee award resulted in reversible error. Not so, said the appellate panel deciding the case. The statement of decision by the lower court was specific enough so there were bases to affirm the award under either the needs-based or sanctioning bases. After all, wife had to bounce from L.A. to Seattle and later move to Tennessee to live with her parents, establishing a disparity with husband’s income/assets.

After All, When Initial Loser Became the Eventual Winner, Eventual Loser’s Fees Showed Eventual Winner’s Request Not All That Bad.

Bioquest Venture Leasing v. VivoRx Autoimmune, Inc., Case No. B225195 (2d Dist., Div. 7 Feb. 22, 2012) (unpublished) is one of those procedurally convoluted cases where plaintiff initially won and was awarded attorney’s fees of $900,000 (out of a requested $1,280,114.50) before there was a significant reversal in favor of defendants. On remand, the defense prevailed, and the court awarded defendants attorney’s fees of $1,506,000, approximately $400,000 less than defendants had requested. Reversal of fortune, to say the least.

Cross-Complainants Got Nada, Had to Pay Costs For Turning Down $10,000 998 Offer.

Code of Civil Procedure section 998 can be a potent weapon, especially if a litigant gauges that an action will not garner much but nonetheless makes an offer that should be accepted (or, at least, catch interest). Also, if you are represented by counsel litigants out there, any small clerical errors are not going to invalidate a 998 offer, as Tierstein v. Reiser, Case No. B223570 (2d Dist., Div. 6 Feb. 22, 2012) (unpublished) demonstrates.

In this one, losers--defendants/cross-complainants--were not pleased at all when the trial court determined that their opponents had obtained an irrevocable license of limited duration to preserve views over losers’ property. (After all, winners thought they had cut an oral deal on plant trimming and actually made some improvements and other expenditures, only to be told by losers--and we quote--”we’re not trimming bushes anymore,” “you’re a fucking asshole,” “we’re done,” and “it’s tough shit for you.” [As co-contributor Mike has been known to say during some years of civil practice, “You can’t make this s _ _ _ up”--but only to those who work closely with him, usually not opponents!.]) For our fee blogging purposes, after cross-complainants recovered nothing, cross-defendants sought costs of $30,934.19 from the other side based on the rejected 998 offer (with most of the costs being expert witness fees, which we have found to be the case in many, many cases).

What happened on appeal? Well, I think many of our readers probably have guessed it--costs award affirmed.

Why? Well, the 998 offer was narrowly targeted to the cross-claims and the loser did miscalculate and eventually lose. That is, in a way the appellate court said, a by-product of modern litigation--you fail to meaningfully evaluate a 998 offer, you lose. Losers argued that there were clerical errors in the offer, but the appellate court said, “No way.” Losers were represented by counsel, such that counsel could simply explore any deficiencies and then advise the clients after talking to offerors‘ (opposing) counsel. (Berg v. Darden, 120 Cal.App.4th 721, 730-731 (2004); Westamerica Bank v. MBG Industries, 158 Cal.App.4th 109, 128-129 (2007).)

BLOG UNDERVIEW--We noticed that Justice Coffee was the author of this decision on behalf of a 3-0 panel. Looks like he has retired. Co-contributor Mike did appear before him a couple of years ago on an argument in a panel in which he was a participant. He was a gentleman, and we wish him well in his retirement.

Fee denial affirmed. Although admitting that the legislative history of section 3260.1 discloses that both interest and attorney’s fees are awardable as penalties under the prompt payment statute (even though fees usually do not fall within the common definition of a penalty), the appellate court nonetheless found fees were not justified because contractor failed to prevail on its prompt payment violation claim. In finding that interest and fees were both statutorily-prescribed, the Second District followed the reasoning in Hinerfeld-Ward, Inc. v. Lipian, 188 Cal.App.4th 86, 98-99 (2010) [discussed in our September 2, 2010 post], which was subsequently followed by the Fourth District, Division 3 in its unpublished opinion in Pacifica West General Contracting (discussed in our March 12, 2011 post).

In our January 25, 2012 post, we discussed Building a Better Redondo, Inc. v. City of Redondo Beach, Case No B226499, a Second District, Division 8 decision which was unpublished at the time. We can now report that the case was certified for publication on February 22, 2012 so it is now citable. (However, we do caution that some Los Angeles County Superior Court judges will not credit the decision until the time to challenge it has elapsed.)

First, recoverable attorney’s fees are “costs” that can be recovered under an injunction bond, including enforcement through a motion in the original action. (Code Civ. Proc., § 996.440(a).) This enforcement procedure is summary in nature, but allows the trial court to adjudge credibility based upon declarations/affidavits--in stark contrast to summary judgment motions where factual determinations are taboo.

Third, a trial court has discretion to increase the injunction bond upon proof that more fees have been expended to defend the case as compared to the amount of the previously posted bond. This can be done through a motion supported by a defense declaration, subject to the lower court’s credibility determinations as to the testimony. Any opposition to an increase request proceeds based on declarations/affidavits also. (Code Civ. Proc., § 996.010(b)-(d).)

Fourth, enforcement of the injunction bond has to await entry of a final judgment in the underlying action. (§ 996.440(b).)

Fifth, a judgment creditor’s failure to acknowledge a satisfaction of judgment does allow the judgment debtor to move to compel such acknowledgment, with judgment creditor not being able to condition the acknowledgment on paying amounts in excess of the particular judgment involved--meaning that the judgment creditor may need to obtain a separate judgment to recover injunction bond and appellate costs in many cases. When a judgment debtor prevails on such a motion to compel acknowledgment of judgment satisfaction, the trial court must award reasonable fees. (Code Civ. Proc., § 724.080; Lucky United Properties Investment, Inc. v. Lee, 185 Cal.App.4th 125, 140 (2010) [discussed in our May 29, 2010 post].)